You can truly diversify your assets to better protect and grow your hard-earned wealth.

By Ford Stokes, RSSA, MBA – President & Founder of Active Wealth Management

Retirement planning can be one of the most exciting yet challenging endeavors of your financial life. It is a process that involves careful consideration of how to protect the hard-earned money you have diligently saved over the years, ensuring that it can fund a comfortable lifestyle for decades to come. Having worked with many clients at Active Wealth Management—our private wealth management firm based in Alpharetta, GA, with additional offices in Midtown Atlanta and Kennesaw—I’ve seen firsthand the challenges people face when trying to plan for the retirement they envision. However, I’ve also seen the rewards of a well-thought-out and executed financial strategy. This blog post is designed to help you lay a solid foundation for a secure retirement by focusing on protecting and growing your wealth, managing risk, minimizing taxes, and making strategic decisions around Social Security and fixed indexed annuities.

I’m honored to serve clients across the nation, though most of our clients reside in Georgia, Alabama, and Florida. I’m also the host of Retirement Results, the #1 listened-to financial show on AM 920 The Answer in Atlanta, and I want to express my gratitude to our listeners who have helped our Retirement Results Podcast surpass 20,000 downloads in the past year. Thank you for trusting me with your valuable time and attention.

In this blog post, we will explore:

  1. Why effective retirement planning matters
  2. How to ‘Delete the IRS’ from your retirement accounts through Roth Ladder Conversions
  3. The importance of establishing guaranteed income strategies using Fixed Indexed Annuities (FIAs) as a “bond replacement”
  4. When to take Social Security—and how to optimize it
  5. Minimizing risk in your portfolio through true diversification and understanding ‘standard deviation’
  6. Building a fee-efficient and tax-efficient portfolio
  7. Estate planning considerations to help avoid probate and protect your legacy
  8. Taking the next step to get a free portfolio analysis and personalized guidance

By walking through these key areas, my goal is to help you feel more confident in your retirement strategy, so you can maintain your lifestyle without fear of outliving your money.

Let’s dive into the conversation.

1. Why Effective Retirement Planning Matters

Retirement planning isn’t just about having a large nest egg—it’s about ensuring that nest egg can sustain your desired lifestyle for the rest of your life. People are living longer, and while that is wonderful news, it also means your retirement savings may have to last 25, 30, or even 40 years.

Some of the biggest risks retirees face include:

  • Longevity Risk: The possibility of outliving your savings.
  • Market Volatility: A downturn in the market can severely impact the size of your portfolio if you’re not adequately protected or diversified.
  • Inflation: Cost of living increases can erode purchasing power over time if your savings do not outpace inflation.
  • Healthcare Costs: Medical expenses typically rise as we age.

When you plan for retirement proactively, you stand a much better chance of preventing these risks from derailing your financial security. The earlier you start, the more time you have to grow and protect your assets in a strategic way.

2. ‘Delete the IRS’ from Your Retirement Accounts Through Roth Ladder Conversions

One of the biggest drains on retirement assets can be taxes. Traditional retirement accounts like 401(k)s, IRAs, 403(b)s, and 457 plans allow you to contribute pre-tax funds. This is great while you’re in the accumulation phase because your investments benefit from tax-deferred growth; however, once you begin taking distributions in retirement, the IRS will tax you at ordinary income rates on the money you withdraw.

This is why I encourage a strategy I call ‘deleting the IRS from your retirement accounts.’ It’s accomplished through a 5- to 7-year strategic Roth Ladder Conversion. Here’s how it works:

  1. Evaluate Your Current IRA Balances: First, we look at the total amount in your traditional IRA or other tax-deferred accounts.
  2. Partition and Convert: Over a 5- to 7-year period (sometimes longer depending on your individual situation), you convert a portion of your pre-tax IRA balance into a Roth IRA.
  3. Pay the Taxes from Taxable Funds: To maximize the amount of money going into your Roth, you pay the taxes for each conversion from your savings or a taxable investment account, rather than taking it out of the IRA proceeds.
  4. Enjoy Tax-Free Growth and Withdrawals: Once the money is in the Roth IRA, it grows tax-free. And once you’ve satisfied the five-year holding period and reached age 59½, you can withdraw both the contributions and gains entirely tax-free.

This strategy has multiple benefits:

  • Permanent Tax-Free Status: Once inside the Roth IRA, those dollars are forever free from federal income taxes under current tax law.
  • No Required Minimum Distributions (RMDs): Traditional IRAs and 401(k)s require you to take RMDs starting at age 73 (for those who turned 72 after January 1, 2023; this is subject to change if Congress changes the laws again). Roth IRAs have no RMDs, giving you more control over how and when you take distributions.
  • Potential Estate Planning Benefits: Passing on Roth IRA assets to heirs may allow them to enjoy tax-free withdrawals for a period of time, depending on the rules in place.

It’s essential to do this carefully. A misstep can push you into a higher tax bracket or trigger unwanted penalties. That’s why working with a qualified financial professional and a tax advisor is critical to ensure the strategy fits your situation.

3. Establishing Guaranteed Income with Fixed Indexed Annuities (FIAs) as a Bond Replacement Strategy

The Role of Bonds and the Challenge They Present

Traditionally, retirees have used bonds to create a ‘safer’ part of their portfolio that generates predictable income while balancing out the riskier equity portion. However, we are living in an era of historically low interest rates (even with the interest rate hikes we’ve seen recently, they are still low compared to historical highs), which can significantly diminish the yield and benefits offered by bonds.

Moreover, bonds are not entirely risk-free—they are sensitive to interest rate movements. When rates go up, the value of existing bonds typically goes down. This is one reason why I recommend considering Fixed Indexed Annuities (FIAs) as a bond replacement in your portfolio.

Benefits of Fixed Indexed Annuities

A Fixed Indexed Annuity is an insurance product that offers:

  • Protection of Principal: Even if the market index the annuity is tied to drops significantly, your principal will not decrease in value due to market losses.
  • Market-Like Gains Without Market Risk: Your returns are linked to the performance of a market index (such as the S&P 500), but there is a ‘floor’ that protects you from negative returns.
  • No Advisory or Portfolio Fees: Unlike many investment products, FIAs typically do not charge ongoing management fees.
  • Lifetime Income: Most FIAs can be configured with an optional income rider that guarantees you a stream of income you cannot outlive.

How Much of Your Portfolio Should Be in FIAs?

I generally recommend investing 20% to 40% of your overall retirement portfolio into an FIA, depending on your specific risk tolerance, income needs, and timeline to retirement. This is not to say you should abandon equities or other investment classes, but the FIA portion is what we consider the “retirement income” piece. This approach does several things:

  1. Guarantees a Portion of Your Income: It works similarly to a pension, as it can provide income for life.
  2. Reduces Your Overall Portfolio Fees: Because FIAs have zero advisory fees, if 40% of your portfolio is in an FIA, you immediately reduce your total advisory fees by 40%.
  3. Helps You Sleep Better: Knowing that part of your nest egg is not exposed to direct market losses can bring tremendous peace of mind.

When to Start with FIAs

Many people think annuities are only for retirees or those about to retire. However, there’s a growing trend—and it’s one I wholeheartedly support—of starting an FIA as early as age 45 to begin the accumulation phase. If you wait to take withdrawals for 10 to 15 or more years, you’re giving the annuity a significant amount of time to grow and compound.

Additionally, there’s a substantial wave of pre-retirees in their early 50s who are embracing FIAs to anchor the income portion of their retirement portfolio. This strategic move allows them to build what is essentially their own personal pension while still having time for the accumulation phase to benefit from market-like growth, all without subjecting that portion of their capital to the volatility of the stock market.

4. When to Take Social Security—and How to Optimize It

The Significance of Social Security Timing

Social Security can be one of the largest sources of guaranteed income for retirees. The decision about when to claim Social Security benefits is critical because:

  • Claiming too early (age 62) reduces the amount you receive monthly.
  • Waiting until your full retirement age (FRA) or beyond (up to age 70) can increase your monthly benefit substantially.

Registered Social Security Analyst (RSSA) Expertise

I am a Registered Social Security Analyst (RSSA), one of only 15 in the State of Georgia. My role is to help individuals and couples maximize their Social Security benefit through a comprehensive analysis of your personal situation, your earnings history, your marital status, and other factors.

We generate optimized claiming strategies that show you how much more income you could receive over your lifetime if you take advantage of specific filing strategies. This might include coordinating benefits with a spouse, using restricted applications when applicable, or delaying benefits to capture delayed retirement credits.

Why Social Security Timing Is One of the Top Two Retirement Decisions

Your Social Security claiming strategy can impact the total benefits you’ll receive by tens or even hundreds of thousands of dollars over your lifetime. The other top decision, as I mentioned earlier, is when to invest in a fixed indexed annuity to create your own personal pension. Together, these two decisions can significantly shape the foundation of your retirement income plan.

5. Minimizing Risk Through True Diversification and Understanding ‘Standard Deviation’

When people talk about risk, they often talk about volatility—ups and downs in the market. One of the most common statistical measures of volatility is standard deviation.

Defining Standard Deviation for Investors

  • Standard Deviation: In financial investing, standard deviation measures how much an investment’s returns vary from its historical average. A higher standard deviation indicates a wider range of potential returns (i.e., more volatility or risk). A lower standard deviation suggests more stability in returns.

For example, if a particular mutual fund has a high standard deviation, it means the returns can swing drastically around its average—some years may be significantly above the average, some significantly below. If a mutual fund has a low standard deviation, its returns are relatively stable and less prone to extreme fluctuations.

True Diversification to Minimize Risk

People often think of diversification simply as owning multiple stocks or a mix of stocks and bonds. However, true diversification is about owning different types of assets whose performance does not correlate perfectly with each other. Our approach at Active Wealth Management includes:

  1. Stocks, ETFs, and Managed Portfolios: These provide potential growth.
  2. Insurance Products: Including fixed indexed annuities and indexed universal life insurance (IUL). FIAs protect against market loss and provide guaranteed income. IUL can offer both a death benefit and the potential for cash value accumulation that can be accessed tax-free under current tax laws.
  3. Other Alternatives or Defensive Assets: In certain market conditions, assets like real estate, commodities, or structured notes (where appropriate) may help further diversify and reduce overall portfolio volatility.

We manage portfolios with a 50% tactical asset allocation and 50% strategic asset allocation approach. Tactical asset allocation allows for active adjustments based on market conditions, while strategic asset allocation provides a stable, long-term framework. Our primary aim is to reduce standard deviation (volatility) so that you can achieve a fair exchange of risk and reward for your investment dollars.

Strategic Asset Allocation involves setting a target or fixed mix of assets—such as stocks, bonds, and cash—based on an investor’s long-term goals, risk tolerance, and investment horizon. Under this approach, the investor determines an ideal asset mix (e.g., 60% equities, 30% bonds, and 10% cash) and adjusts it only when significant changes to the investor’s objectives or circumstances occur, or to periodically rebalance back to the original allocations. Strategic Asset Allocation is grounded in the idea that over long periods, different asset classes have historically exhibited relatively predictable returns and risk profiles, allowing an investor to capture market returns and growth by staying committed to a consistent, well-thought-out plan.

Tactical Asset Allocation is a more active approach that allows for short- to intermediate-term deviations from a portfolio’s strategic asset mix. In this method, an investor (or investment manager) analyzes market conditions and economic indicators to make timing decisions—overweighting certain asset classes or sectors when they appear likely to outperform and underweighting them when they look less favorable. Tactical Asset Allocation seeks to capitalize on market inefficiencies or trends, aiming to enhance returns or reduce risk beyond what a purely strategic approach can achieve. However, it also carries the risk that timing decisions may not always be correct, potentially causing the portfolio to underperform its long-term benchmark.

By combining Strategic and Tactical Asset Allocation, an investor can benefit from the stability and discipline of a long-term strategy while still having the flexibility to respond to changing market conditions. The strategic element maintains the overall framework aligned with the investor’s core objectives and risk tolerance, while the tactical component allows for adjustments to capture short-term opportunities or avoid near-term risks. This blend can help create a more responsive and potentially resilient investment approach over time.

6. Building a Fee-Efficient and Tax-Efficient Portfolio

Eliminating Unnecessary Fees

Investment fees can significantly erode your returns over the long term. This is why we focus on:

  • Replacing Bonds with FIAs: As mentioned, FIAs have zero portfolio fees. If you reallocate what might have been a 20% to 40% bond allocation into an FIA, you’re automatically cutting the advisory fees on that portion of your portfolio.
  • Low Advisory and Portfolio Fees: We charge some of the lowest advisory fees in the Southeastern United States, including Georgia, Alabama, and Florida. We believe in transparency and fairness—our goal is to make sure you keep as much of your money working for you as possible.

Maximizing Tax Efficiency

Beyond fees, we also pay close attention to taxes. Tax efficiency involves structuring your investments in such a way as to:

  1. Minimize taxes on growth—via Roth accounts, tax-free bonds (where appropriate), or life insurance structures.
  2. Control the timing of your taxable distributions—especially important if you are in a higher bracket during retirement or anticipate large RMDs.
  3. Plan for generational transfers—so that assets passed down to heirs are as tax-efficient as possible under current tax laws.

This is where strategies like the Roth Ladder Conversion become so powerful. By steadily moving money from your tax-deferred accounts into Roth IRAs and paying taxes from outside funds, you’re preserving more of your nest egg in a tax-free environment. This systematic approach can reduce your RMD burden later in life and potentially save you—and your heirs—thousands of dollars in taxes.

7. Estate Planning Considerations to Help Avoid Probate and Protect Your Legacy

The Role of Estate Planning

Estate planning ensures your assets are distributed according to your wishes, helps minimize taxes, and can avoid the lengthy and often costly probate process. Through our partnerships with Estate Attorneys licensed in various states, we help clients create:

  • Wills: Legal documents specifying how you want your assets distributed and naming guardians for any minor children.
  • Revocable (Living) Trusts: These trusts can help avoid probate, maintain privacy, and allow you to retain control of your assets during your lifetime.
  • Irrevocable Trusts: Often used for more complex estate planning or tax strategies.

Avoiding Probate

When you pass away, your estate generally goes through a legal process called probate, which can be lengthy, expensive, and stressful for your loved ones. A revocable living trust can help your heirs avoid or greatly minimize probate. When your assets are titled in the name of the trust, they pass directly to your named beneficiaries, often more smoothly than if they were distributed through a will alone.

We Do Not Share Fees with Estate Attorneys

At Active Wealth Management, we don’t profit by referring you to an attorney for estate planning. We do this purely to add value for our clients, ensuring you have an estate plan that’s aligned with your overall financial goals. By working with attorneys who provide lower-cost legal services, you can have peace of mind knowing you’re getting an excellent estate plan without overpaying.

8. Taking the Next Step: Get a Free Portfolio Analysis

Planning for retirement can be complex, but you don’t have to go it alone. Whether you need to:

  • Analyze your current portfolio for potential improvements,
  • Assess the feasibility of a Roth Ladder Conversion,
  • Explore bond replacement through Fixed Indexed Annuities,
  • Optimize Social Security claiming strategies,
  • Reduce fees and minimize taxes, or
  • Create or update your estate plan,

I invite you to contact me personally at our Alpharetta office at 770-685-1777 or send an email to [email protected]. I’m offering a Free Portfolio Analysis—a $2,500 value—at no cost to you. This is an excellent opportunity to get a professional review of your financial situation, identify any gaps or inefficiencies, and develop a roadmap for a secure and fulfilling retirement.

Bringing It All Together: A Holistic Approach to Retirement

When it comes to retirement, there is no “one-size-fits-all” approach. Each individual has unique goals, challenges, and opportunities. That’s why at Active Wealth Management, we believe in a holistic approach, integrating:

  1. Growth and Protection: Balancing equity growth opportunities with the protection offered by instruments like Fixed Indexed Annuities.
  2. Tax Planning: Systematically and strategically executing Roth conversions to reduce or eliminate your future tax liabilities.
  3. Income Planning: Determining the best time to claim Social Security, ensuring a stable income throughout retirement, and creating “personal pension” strategies using annuities.
  4. Estate Planning: Partnering with qualified estate attorneys to protect your legacy and help your loved ones avoid probate.
  5. Fee Efficiency: Cutting unnecessary fees through bond replacement and low-cost advisory services, so more of your money stays with you.

Why Start Now?

Even if you’re still in your 40s and think retirement is far away, starting the planning process early can pay dividends, literally and figuratively. The magic of compounding, smart tax planning, and strategic asset allocation can all work in your favor given enough time. If you’re closer to retirement, it’s never too late to implement risk mitigation strategies and optimize your income sources.

We Want Your Money to Outlive You

A common fear among retirees is running out of money. Our objective is the opposite: we want your money to outlive you. By carefully managing risk, leveraging the benefits of FIAs, and maximizing your Social Security benefits, we strive to create a plan that provides not just for your needs, but also allows you to leave a financial legacy for your loved ones.

Key Takeaways

  • Delete the IRS from Your Retirement: Implement a strategic Roth Ladder Conversion plan over 5-7 years to permanently remove future tax burdens on your retirement savings.
  • Replace Bonds with Fixed Indexed Annuities: Enjoy principal protection, market-like gains without market risk, no advisory fees, and guaranteed income for life.
  • Decide When to Take Social Security: Work with an RSSA to maximize your benefit and learn advanced claiming strategies.
  • Minimize Risk via True Diversification: Balance growth with principal protection, blend 50% tactical and 50% strategic approaches, and lower standard deviation.
  • Enhance Fee and Tax Efficiency: Reduce or eliminate bond fees, lower advisory costs, and take advantage of tax-free growth opportunities.
  • Plan Your Estate Properly: Use wills, revocable trusts, and other legal vehicles to protect your family and avoid probate.
  • Act Now: The earlier you start, the more time your strategies have to work.

Thank You for Reading and Listening

I want to thank you again for following our journey at Retirement Results on AM 920 The Answer, and for those who have downloaded and listened to our Retirement Results Podcast over the past year—our growing community of over 20,000 downloads is both humbling and exciting. Our mission is to educate and empower you to make decisions that safeguard your future.

Whether you’re just beginning to think about retirement, are 5-10 years away, or already retired but looking to improve your situation, we’re here to help you navigate each step. Life is too short to worry about money during your golden years. With proper planning, you can enjoy retirement doing the things you love, spending quality time with family, traveling, and living life on your terms.

If you have questions or want a free, no-obligation portfolio analysis (valued at $2,500), please reach out. You can call my Alpharetta office at 770-685-1777 or send me an email at [email protected].

Let’s work together to ensure you achieve the Retirement Results you’ve always dreamed of—secure, confident, and free from unnecessary fees and tax burdens. Thank you for allowing me to be part of your retirement planning journey.